It’s time to end monopoly says MEI
MONTREAL – The Société de Transport de Montréal is often in the news when the metro breaks down, or for its poor management. On the occasion of the metro’s 50th anniversary, the Montreal Economic Institute is publishing an Economic Note showing that these problems are not anecdotal. The STM has a long history of inefficiency, and it is all Quebec taxpayers who are footing the bill.
Since the introduction of Montreal’s metro system in 1966, the public transit corporation’s inflation-adjusted total costs per kilometre travelled increased by 163%. This increase in costs was not accompanied by increases in the reliability of the service. From 1983 to 2015, reported major delays in subway services went from 6.3 per million kilometres travelled to 12.2.
Before public transit was taken over by the City of Montreal, this service was operated by a regulated private monopoly. This entity had actually managed to do a better job of controlling its costs, all while expanding services. Indeed, costs per kilometer travelled fell 17% between 1933 and 1950 while distance travelled increased 61%.
“Without competition, a monopoly has very little reason to improve its performance, especially if it is lavishly subsidized,” says Germain Belzile, Senior Associate Researcher at the MEI and co-author of the publication.
Elsewhere in the world, many governments have either privatized their transit systems or delegated parts of their activities to private companies. In London, England, such reforms led to reductions in operating costs per vehicle-kilometre of 28% between 1985-1986 and 2008-2009. In the United States, full privatization reduced operating costs per kilometre by up to 70% in certain transit agencies.
“These solutions based on the involvement of the private sector push companies to better control their costs, to increase their efficiency, and to respond more adequately to the needs of users,” points out Germain Belzile.
As one possible solution, the authors suggest that Montreal could set up a system of competitive bidding for various services, and that the City could allow private companies to offer them. Bus services would be an ideal place to start, as we could learn from conclusive foreign experiments like London’s.
“Taxpayers in Montreal and across Quebec pay the STM $659 million a year. The STM also receives an additional $744 million in subsidies for its investment budget,” adds Vincent Geloso, Associate Researcher at the MEI and co-author of the Note. “Taxpayers have a right to demand that officials show some openness to successful models that have been implemented in other countries.”
The Economic Note entitled “Transiting to Privatization” was prepared by Germain Belzile, Senior Associate Researcher at the MEI, and Vincent Geloso, Associate Researcher at the MEI. This publication is available onour website.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebecand across Canada by proposing wealth-creating reforms based on market mechanisms. – CNW Telbec